Reinsurance Claims

REINSURER PERMITTED TO REFUSE CONSENT TO NEW BOND OFFERING DESPITE INSURED’S COMPLIANCE WITH “ADDITIONAL DEBT TEST”

May 22, 2012 by Carlton Fields

A hospital sued its bond insurer and reinsurer for losses incurred pre-paying certain debt before learning that the insurers would refuse to consent to the hospital’s plan to procure additional debt to fund a new facility. The hospital contended that the underlying policy implicitly required the insurer and reinsurer to provide consent to additional loans if the hospital complied with the policy’s “additional debt test” standards, with which the hospital allegedly complied. The court disagreed and dismissed the case, holding that the policy provided an unqualified right to the insurers to withhold consent. The consent provisions were unconditional on their face and, moreover, contained in a section of the policy separate from the debt test provisions. The court further held that the hospital’s allegations of improper motives on the part of the insurers should be dismissed, where the insurers purportedly withheld consent to conduct diligence on what was to be a $350 million bond offering deal. Woman’s Hospital Foundation v. National Public Finance Guarantee Corp., Case No. 11-cv-00014 (USDC M.D. La. Mar. 20, 2012).

This post written by Michael Wolgin.

See our disclaimer.

INSURER PREVAILS ON CONTRIBUTION CLAIMS

May 17, 2012 by Carlton Fields

Land O’ Lakes, a member-owned agricultural cooperative, acquired a property in Oklahoma that was later designated by the EPA as a “Superfund” clean-up site. In or about 2001, the EPA notified Land O’ Lakes that it was a Potentially Responsible Party (“PRP”) for the clean-up costs, and demanded $8.9 million. Land O’ Lakes notified its insurers, who declined coverage. In or about 2008, the EPA sent a renewed notice to Land O’ Lakes, demanding more than $20 million in additional clean-up costs. Land O’ Lakes again turned to its insurers and all declined coverage. Land O’ Lakes sued and all issues were raised via cross motions for summary judgment, with all parties seeking judgment in their favor. While the majority of this opinion addresses the direct claims by Land O’ Lakes against its insurers, the Court granted summary judgment to White Mountains Reinsurance on contribution claims asserted against it by Travelers Indemnity and Employers Insurance Company of Wausau. Summary judgment was predicated upon alternative grounds, the most basic of which was that although Travelers and Wausau breached their duty to defend Land O’ Lakes, that claim, upon which the claim of contribution was based, was barred by the statute of limitation. Land O’ Lakes, Inc. v. Employers Mut. Liability Ins. Co. of Wisconsin, Case No. 09-CV-0693, (USDC D. Minn. Mar. 6, 2012).

This post written by John Pitblado.

See our disclaimer.

NEW YORK HIGH COURT DISMISSES DONNELLY ACT CLAIMS AGAINST EQUITAS

April 24, 2012 by Carlton Fields

New York’s Court of Appeals reversed the Appellate Division of the Supreme Court and upheld the trial court’s dismissal of plaintiff’s claim against Equitas under the Donnelly Act, New York’s antitrust law. The plaintiff, a cedent under certain retrocessional agreements with various Lloyd’s syndicates covering non-life exposures, alleged that Equitas engaged in antitrust violations because it controlled the market for retrocessional and reinsurance claims adjustment for these types of so-called “long tail” claims, such as asbestos-related injury claims. Equitas was formed and approved by European governmental authorities, as a claims adjustment facility for the Lloyd’s syndicates, in order to manage exposures which threatened the financial stability of syndicates, and the market itself. The high court held that even if there were a “market” for the claims handling function performed by Equitas (which it found dubious), it held that any such market would not have a sufficient nexus with New York State to warrant extra-territorial application of its antitrust law. Global Reinsurance Corp. v. Equitas, Ltd., No. 2012-53 (N.Y. March 27, 2012).

This post written by John Pitblado.

See our disclaimer.

TRAVELERS AND R&Q RE SETTLE REINSURANCE ACTION RELATED TO ASBESTOS CLAIMS

April 19, 2012 by Carlton Fields

Travelers and R&Q Reinsurance recently settled and agreed to voluntarily dismiss their ongoing dispute in the US District Court for the District of Connecticut. The action arose out of a series of reinsurance contracts between Travelers and R&Q Reinsurance (successor in interest to INA Re). The reinsurance contracts were part of Traveler’s Blanket Excess of Loss program, incepted in 1962, and covered a period between April 1, 1976 through April 1, 1979. The contracts covered asbestos related claims which were indemnified by Travelers. In this action, Travelers filed a Complaint alleging breach of contract, contending that it had properly indemnified an asbestos producer but that INA Re wrongfully had refused to pay in violation of the reinsurance agreements between the parties. Travelers Casualty and Surety, Co. v. R&Q Reinsurance Co., Case No. 10-01946 (USDC D. Conn. Jan. 31, 2012).

This post written by John Black.

See our disclaimer.

COURT AWARDS PREJUDGMENT INTEREST TO REINSURER ON PAST DUE BILLINGS

April 12, 2012 by Carlton Fields

Munich Reinsurance America, Inc. and Tower Insurance Co. of New York were parties to certain reinsurance and retrocessional agreements. A billing dispute arose and Munich Re brought suit. Tower had resisted payment of the billings due because it had not received sufficient information demonstrating its liability for the billed amounts. During the course of discovery the parties reconciled the billings, and determined and agreed that Tower owed Munich $3,287,597. They disputed how much interest Tower should be charged for its withholding, and moved for summary judgment on the issue, with Tower contending interest should be limited to $5,404.27, and Munich Re contending it was owed $673,806.00, based on differing views of the rate and accrual date. Citing its equitable powers, and with guidance from state civil procedure rules applicable to interest on contract debts, the Court split the baby, finding Tower owed Munich Re $168,093.61 in pre-judgment interest. Munich Reinsurance America, Inc. v. Tower Ins. Co. of New York, No. 09-2598 (USDC D.N.J. Mar. 26, 2012).

This post written by John Pitblado.

See our disclaimer.